Rice glut expands with farms poised for record crop

Farmers are preparing to plant a record rice crop that will boost inventories held by the world’s biggest exporters to the highest ever.

Harvests will climb 1.2% to 472 million metric tons as the five largest shippers hoard 38 million tons, or a year of global imports, International Grains Council data show. Thailand may run out of warehouse space as reserves jump 40% to a record 18.2 million tons, according to the United Nations. Prices in Vietnam, an Asian benchmark, will drop 6.6% by December to $377.50 a ton, the lowest level since 2010, based on the median of 10 trader estimates compiled by Bloomberg.

Global food supplies are rising as the worst U.S. drought since the 1930s abates and the U.S. Department of Agriculture predicts record corn and soybean harvests. Expanding stockpiles may help contain world food costs that have tumbled 12% from an all-time high in 2011. Production of rice, the staple for half the world, is set to climb to an all-time high for a fourth season in 2013-2014 while inventories in Thailand have almost doubled in three years, IGC data show.

“The price outlook in the long run looks rather bleak,” said Jac Luyendijk, chief executive officer at Swiss Agri Trading SA, which handles about 600,000 tons a year. “We have to keep in mind that with these increasing rice stocks in Thailand, the problem will become bigger and bigger. Once Thailand unloads its stockpiles, we will look to very depressed rice prices for the years to come.”

Government Buying

In Vietnam, supplier of 20% of global exports, 5% broken white rice has fallen 9.4% to $404 in the past year, UN data show. The Standard & Poor’s GSCI Agriculture Index of eight commodities lost 0.7%, while the MSCI All- Country World Index of equities advanced 7.9%. Treasuries returned 2.1%, a Bank of America Corp. index showed.

Global inventories are already rising 7% to a record 171 million tons in 2012-2013 as supply beats consumption for an eighth season, according to the UN Food & Agriculture Organization. Governments from China to Thailand are buying from farmers at above-market rates, boosting harvests, the FAO says.

“Production could well surpass the 2012 record and even outpace consumption,” said Concepcion Calpe, the secretary of the FAO’s inter-governmental rice group, who has tracked the market since 1998. Harvests contracted only once in the past decade, she said by e-mail.